Gold price extends gains in Pakistan

• Price is “overcost” by Rs3,000 per tola in Pakistan.
• Gold price settles at Rs188,600 per tola.
• Silver price rises by Rs20 per tola in local market.

Gold price extended gains on Monday as investors whipped towards the safe-haven metal amid bleak economic data, debilitated currency, and shaky pace of growth.

Data released by the All Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed the price of gold surged by Rs950 per tola and Rs814 per 10 grams to settle at Rs188,150 and Rs161,308.

The yellow metal touched a record high of Rs188,600 per tola in the local market on January 4 as the stability of the Pakistan rupee against the US dollar shifted investors' focus towards a safe-haven asset.

The precious commodity remains caught between elevated inflation, growing concerns over a recession and a flight to safety on one hand and sharp rate hikes, a strong dollar globally, and seasonally weak demand on the other.

Investors who used to pour money into foreign currencies, particularly the US dollar to avoid the impact of inflation, are now buying gold because the government and the central bank are trying to reduce the rupee-dollar parity.

Past practices suggest that people used to take aggressive positions in gold in inflationary days.

The association reported that the price of gold has been “overcost” by Rs3,000 per tola in Pakistan, as compared to prices in Dubai. This means that, at present, the Pakistani gold market is more expensive than the world market.

It should be noted that Pakistan meets almost all its gold demand through imports, and traders follow its international price in setting rates in the country. Jewellers import the metal against the US dollar and UAE dirham before converting its price into rupees.

Goldsmiths also mentioned that the majority of the buyers in the local market comprise gold investors these days. Earlier, they were parking their savings in the US dollar to avoid the impact of rupee devaluation at a time of high inflation.

They believe that the investors started moving to the bullion market following the shortfall of the dollar in the open market. In the black market, illegal traders were selling the dollar for Rs300-350 compared to Rs229 in the interbank market.

Meanwhile, silver prices in the domestic market rose by Rs20 per tola and Rs17.15 per 10 grams to settle at Rs2,100 and Rs1,800.41.

In the international market, the gold pulled back from session highs and expectations of a slower pace of Federal Reserve rate hikes supported prices above the $1,900 threshold. The price settled at Rs1,909 per ounce after a decrease of $6.